Eurozone flash PMI signals cooling inflation amid rising recession risks

Chris Williamson
July 23, 2023
Eurozone business output fell at the fastest rate for eight months in July, according to the latest HCOB flash PMI survey data produced by S&P Global, marking a weak start to the third quarter. Deteriorating forward-looking indicators such as future output expectations and new order inflows also point to the likelihood of the downturn deepening in coming months, prompting companies to pull back on hiring. Price pressures meanwhile moderated further, with average selling prices rising at the slowest rate for almost two-and-a-half years. Prices charged by manufacturers fell at a rate not seen since the height of the global financial crisis in 2009 amid slumping demand, while service sector selling price inflation cooled to a 21-month low. Measured overall, the PMI's gauge of selling prices for goods and services is indicative of consumer price inflation continuing to cool at an encouraging pace in the months ahead. While markets have been pricing in at least one further interest rate hike by the European Central Bank, the falling output signalled by the PMI in conjunction with the cooling of price pressures will add to speculation that rates may soon peak or be put on hold pending further data signals.
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